Saturday, March 15, 2014

Krugman and the Fear of Wages

Although Krugman is a New Keynesian, who, by definition, oftentimes implicitly assumes a natural rate, he is quite on point:

Four
years ago, some of us watched with a mixture of incredulity and horror
as elite discussion of economic policy went completely off the rails.
Over the course of just a few months, influential people all over the
Western world convinced themselves and each other that budget deficits
were an existential threat, trumping any and all concern about mass
unemployment. The result was a turn to fiscal austerity that deepened
and prolonged the economic crisis, inflicting immense suffering.